US 'spoofing' trader faces $4.5 million in penalties
US and British regulators Monday announced settlements totaling $4.5 million with a US high-speed trader who allegedly made more than $1 million using a series of fake commodity trades.
The US Commodity Futures Trading Commission announced a $2.8 million settlement with Panther Energy Trading of New Jersey and its owner, Michael Coscia. Half of the sum will go to a civil monetary penalty, while the other $1.4 million is to disgorge trading profits.
Coscia and Panther must also pay an additional $800,000 to the CME Group, which owns several leading commodities exchanges, the CFTC said in a statement. In addition, they have to pay about $1.3 million to disgorge trading profits.
The CTFC banned Panther and Coscia from trading on any of its entities for one year, while CME Group banned Coscia from trading on its exchanges for six months, the statement said.
Britain's Financial Conduct Authority fined Coscia $903,000 in the case. The fine was reduced from a $1.15 million fine because Coscia agreed to settle, the FCA said.
Coscia declined to comment Monday.
The CFTC order charges Coscia and Panther with a disruptive, illegal trading practice known as "spoofing" in which the trader enters a relatively small order to sell futures contracts, which is then quickly followed by several large "buy" orders at successively higher prices. The trader then cancels the buy orders before they are completed, but benefits by pushing up the price on the items being sold.
"By placing the large buy orders, Coscia and Panther sought to give the market the impression that there was significant buying interest, which suggested that prices would soon rise, raising the likelihood that other market participants would buy from the small order Coscia and Panther were then offering to sell," the CFTC said.
"With this back and forth, Coscia and Panther profited on the executions of the small orders many times over the period in question."
The CFTC alleged that Panther and Coscia successfully utilized this practice in a two-and-a-half month period in 2011 to profit in 18 transactions involving energies, metals and foreign currencies, among other commodities.
Coscia and Panther did not admit or deny the CFTC's findings in accepting the settlement terms, the CFTC said.